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Passers-by in front of the AMC cinema in New York:
The chain is hoping for an end to the pandemic and the return of visitors
Photo: Noam Galai / Getty Images
"AMC to Mars", writes an enthusiastic participant in the "Wallstreetbets" forum on the Reddit online platform.
"Invested all my savings into AMC !!!" announced another.
"Wish me luck guys".
No doubt: the enthusiasm is back. At the beginning of the year, the users of "Wallstreetbets" caused a sensation when they drove the share price of the video game retailer Gamestop to astronomical heights and thus caused heavy losses to some hedge funds that had bet on price losses in the paper. This spectacle now seems to be repeated: The prices of Gamestop and other stocks popular on "Wallstreetbets" such as Virgin Galactic or Blackberry have risen sharply again in the past few days. In particular, the Reddit investors had one paper take off: the shares of the US cinema chain AMC.
On Thursday alone, the AMC rate rose 36 percent to around $ 26.50, its highest level in several years. The rate has more than doubled within a week. And since the beginning of the year, the AMC share has increased in price by more than 1200 percent. The market value of the cinema chain has risen to around twelve billion dollars - even though the company is one of those who suffered most from the corona crisis and the lockdowns of the past few months.
There are apparently various reasons for the explosive rise in AMC's share price. On the one hand, it is the desire of those private investors who exchange information about their investments in forums such as "Wallstreetbets" or on Twitter to hunt for hedge funds. Many of these institutional investors from Wall Street have targeted papers such as AMC or Gamestop for their short bets: They are positioning themselves to make profit from expected price losses. If these losses do not occur, however, and if, on the contrary, there are even price gains, this can lead to difficulties for the shortsellers. In the worst case, they have to buy shares quickly to close positions - a so-called short squeeze is created, which causes the share price of the security in question to skyrocket.
Such a short squeeze provoked the number of online-networked private investors at the beginning of the year at Gamestop, whereby the share price shot up by several hundred percent within a short period of time. And in the case of AMCs, too, this scenario seems to come back. For example, the financial news platform Bloomberg reports, with reference to information from the research company S3 Partners, that both AMC and Gamestop are among the stocks that are currently particularly heavily "shorted" on the US stock market.
With the AMC paper alone, shortsellers have lost around 1.3 billion dollars in the past few days.
Since the beginning of the year, the minus amounts to almost two billion dollars, according to Bloomberg.
Businessinsider also reports billions in losses that hedge funds are making these days with failed short sales of stocks such as Gamestop, Virgin Galactic and AMC.
Hope for a comeback of cinema culture
The "Wallstreetbets" community has good reasons to bet on stocks that are on the "short list" of hedge funds.
Ultimately, the losses that the professionals make in such "short squeezes" ultimately turn into profits for speculative investors who have invested in the hope of further price increases in the corresponding stocks.
In the case of AMC, however, private investors are likely to have another motive for their commitment: Many of them are probably actually hoping for a successful economic comeback for the company after the Corona crisis, when more people can go to the cinema again. After all, other cinema stocks are currently clearly in the black - not nearly as clearly as AMC, but still significant. Imax's paper, for example, has grown by around 25 percent since the beginning of the year. At the US cinema chain Cinemark it is almost 40 percent and at the competitor Marcus Corporation as much as 56 percent.
At AMC, the bare business figures initially give little cause for confidence.
In early March, the company published a drop in sales in the Corona year 2020 of almost 80 percent from 5.4 billion dollars to 1.2 billion dollars.
As AMC also announced at the beginning of May, things did not go any better in the first quarter of 2021: Once again, sales fell by more than 80 percent from around 942 million dollars in the same period of the previous year to 148 million dollars.
However, the company has managed to get a lot of additional liquidity into the house in the past few months - and private equity investors such as those from "Wallstreetbets" or Twitter have given a lot of help.
It is currently one of the company's most important goals to improve the liquidity situation, said AMC boss
Adam Aron
(66) when the quarterly figures were presented in early May. AMC has raised around two billion dollars in fresh capital and loans over the past five months. Over the past 13 months, the proceeds from stock sales and new borrowing amount to $ 2.9 billion. In addition, there are concessions from landlords and donors amounting to $ 1.2 billion, around $ 150 million in government aid in Europe and $ 80 million from the sale of assets.
As early as March, Aron was optimistic that AMC could successfully survive the pandemic.
At the beginning of May he explicitly paid tribute to the part that a "loud, enthusiastic and enthusiastic" base of "around three million private shareholders" has in the possible success of the company.
Private investors buy new shares from AMC
In fact, a good part of the fresh liquidity that AMC recently raised is likely to come from "Wallstreetbets" investors and other private investors. "The Reddit crowd is strong," Bloomberg quoted an analyst from Macquarie Securities. "The volumes have recently been exceptionally high, so there is clearly demand that was not there before Covid." According to the expert, the cinema chain has profited from the "Reddit rally" by issuing new shares for more than ten dollars apiece.
The funds AMC was able to raise by issuing hundreds of millions of new shares are a key to increasing the company's market value, writes Bloomberg.
Accordingly, there are now more than 490 million AMC shares in trading - at the beginning of last year there were only 52 million.
The situation is similar with the bonds that the company has issued.
AMC bonds are also currently in demand, and prices have risen significantly in recent weeks.
It is therefore possible that the crazy share rally that the AMC papers are currently experiencing is at least partly based not only on the efforts of the fortune-tellers networked via online forums, but also on positive business developments.
Or, as one participant on "Wallstreetbets" puts it: "Don't sell! Make me money"
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